GST is an Indirect Tax which has replaced many Indirect Taxes in India.
●
● GST include many state and central level indirect taxes.
● It overcomes drawback present taxsystem.
● The Goods and Service Tax Act was passed in the Parliament on 29th March 2017.
● The Act came into effect on 1st July 2017.
in 2000.
HISTORY OF GST
➢Union Budget 2006-07 announced application of GST from 1st april 2010.
➢Introduced by Vajpayee government➢Bill passed in Lok Sabha on 6th May, 2015.
➢Bill passed in Rajya Sabha on 3rdAugust,2016.
➢GST to be implemented by July, 2017.
TAX STRUCTURE IN INDIA TAX
Direct Tax Indirect Tax
Person Pays tax from own Pocket.
Person Collect Tax from Customer pay to Government.
Examples- Income Tax, Corporate Tax & Wealth Tax. VAT. (GST)
Examples- Excise Duty
Custom Duty, Service Tax
GST RATES
Exempt 5% 12% 18% 28% Food grains, gur, milk, eggs, curd, unpacked paneer, natural honey, freah vegetables, atta, common salt, vegetable oil, prasad
Suger, tea, coffee, skimmed milk powder, packed paneer, newsprint, umbrella, LPG, milk food for babies, beet sugar, natural calcium phosphates
Butter, ghee, mobiles, cashew, almonds, fruit juice,packed coconut, water, agarbatti, bio gas, grade hydrogen, peroxide, lodine
Hair oil, soap, toothpaste, capital goods, industrial intermediaries , pasta corn flakes, jams, ice cream, fountain pen, flourine, chlorine, bromine, artificial waxes
Consumer durables, cars, cement, chewing gun, custard powder, pan masala, perfume, shampoo, make up, motorcycles, hair cream, hair dyes, prepared explosive
GST Types CGST Central Goods and Services Tax
SGST State Goods and Services Tax
IGST Integrated Goods and Ser. Tax
MODELS OF GST
COMPONENTS OF GST
There are three taxes applicablr under this system: CGST, SGST, IGST .
➢CGST:- Collected by the central government on intra-state sale (Eg., transactions happening within Maharashtra)
➢SGST:- Collected by the state government on an intra-state sale (Eg., transactions happening within Maharashtra)
➢IGST:- Collected by the central government on an inter-state sale (Eg., Maharashtra to Tamil Nadu)
➢
In most cases, the tax structure under the new regime will be as follow:
Transaction New Regime Old Regime
Sale within the state CGST + SGST VAT + Central Excise/ Service Tax
Revenue will be shared equally between the centre an d the state
Sale to another state IGST Central Sales Tax + Excise / Service Tax
There will only be one type of tax(central) in case of inter state sales. The centre will then share the IGST revenue based on the destination of goods.
ILLUSTRATION
●Let us assume that a dealer in Gujarat had sold the goods to a dealer in Punjab worth Rs. 50,000. The tax rate is 18% comprising of only IGST.
● In such cases, the dealer has to charge Rs. 9,000 as IGST. This revenue will go to the central government.
●The same dealer sells goods to a consumer in Gujarat worth Rs.50,000. The GST rate on good is 12%. This rate comprises of CGST at 6% and SGST at 6%.
● The dealer has to collect Rs.6,000 as goods and services tax. Rs.3,000 will go to the central government and Rs.3,000 will go to the Gujarat government as the sale is within the state.
TAXES PROPOSED TO BE SUBSUMED IN GST
CENTRAL TAXES
STATE TAXES
Excise duty Value added tax (VAT)
Additional Excise duty Entertainment tax leived by states
Service tax Luxury tax
Surcharge Tax on lottary, betting and gambling
CENVAT Entry tax other then for local bodied (octroi)
PRODUCTS EXCLUDED FROM GST
➢ Petroleum
➢ Alcohol ➢ Tobacco
product
product
●Product A
ILLUSTRATION OF GST
●Base price
●+12% excise duty
●+12.5% VAT
●State GST
●Centre GST
●Total tax burden
●Value of product to consumer
VAT SYSTEM GST SYSTEM 100 100 12 NA 14 NA NA 8 NA 12 26 20 126 120
WHY DOES INDIA NEEDED
GST GST is being introduced majorly due to 2 reasons:-
1) The current indirect tax structure is full of uncertainities due to multiplr rates
2) Due to multiple rates there are multiple forms.
●GST the tax complexity in the prevailing tax regime.
GST COUNCIL
GST levy will be administered by:-
1. Union finance minister (Chairmen)
2. Union minister in charge of state revenue or finance
3. Minister in charge of finance and taxtation.
4. Any other minister (finance minister of the state) nominated by each state govt. would constitiute council.
DISPUTE SETTLEMENT AUTHORITY(DSA)
●Dispute between state and centre will be handled by DSA.
●Appeal from DSA would be dealt with supreme court.
●Example, if a state receives less revenue in comparison with its previous one than it can appeal this case to the DSA.
HURDLES IN IMPLEMENTATION
➢Dispute betweenm centre and tax over tax sharing
➢Highly sophisticated IT infrastructure required
➢ Issue of taxing e-commerce to be appropriately addresed and integrated.
➢Political imbalances.
GST GLOBAL SCENARIO
●Morte than 140 countries have already introduced GST/National VAT.
●France was the first company introduce GST system in 1954.
●Typically it is a single rate system but two/three are also prevalent.
●Canada and Brazil alone have a dual VAT.
●Standard GST rate in most countries ranges between 15-20%.
ADVANTAGES AND DISADVANTAGES OF GST
ADVANTAGES DISADVANTAGES
GST eliminates the cascading effect of tax. Increased costs due to software purchase.
Higher threshold for registration. GST will mean an increase in operational costs. Composition scheme for small businesses. GST came into effect in the middle of the financial year.
Simple and easy onlinme procedure. GST is an online taxtation system.
The number of compliances is lesser. SME's will have a higher tax burden. Defined treatment for e-commerce operaters. Improved efficiency of logistics. Unorganised sector is regulated under GST.
GST- CAN WE ADOPT IT
●An information network allowing GST council to cross -check payment information should be developed.
●What is needed is an IT system like the tax information network (tin).
●Whrre the TDS or the vat credit is recorded in a central database.
●Paper bills and fraud to be largely eliminated.
